Some cities are encouraging the “half purchase, half rent” housing sales model. Will the market buy it?
2024-08-13
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Following Wuhu, Huangshan, Anhui Province, has also recently introduced new policies to explore the purchase of partial property rights and encourage real estate developers to explore the sale of partial property rights. According to the contract, the buyer can choose to purchase part of the property rights of the house first, and the remaining property rights will continue to be held by the real estate developer. The buyer has the right to lease and use this part of the property rights, and when purchasing the remaining property rights, the rent paid can be used to offset the purchase price.
As a new way of selling houses, developers sell part of the property rights, and buyers need to "half buy and half rent". Will the market buy it? What are the risks?
The developer and the buyer jointly hold the property rights, and the latter can rent and use the property
This model, called "half purchase and half rent," is somewhat similar to shared-ownership housing, except that in the former the buyer and the developer jointly own the house, while in the latter the buyer and the government jointly own the property rights.
Huangshan is not the first city to propose this model. This year, Wuhu, another city in Anhui, also proposed "exploring the purchase of partial property rights". On June 7, Wuhu City, Anhui Province, issued the "Notice on Optimizing the Policy Measures for the Stable and Healthy Development of the Real Estate Market in Wuhu City", and launched 13 policies to optimize the development of the real estate market. It pointed out that real estate developers are encouraged to explore the sales method of purchasing partial property rights. Through contractual agreements, buyers can first purchase partial property rights of the house, and the remaining property rights will continue to be held by the real estate developer. Buyers can rent and use it, and the rent paid by buyers when purchasing the remaining property rights can be deducted from the purchase price.
Earlier, Dali had issued a similar policy. On August 1, 2022, the People's Government of Dali Bai Autonomous Prefecture in Yunnan Province issued the "Notice on Printing and Distributing the Implementation Opinions on Promoting the Stable and Healthy Development of the Real Estate Industry", which pointed out that real estate developers are supported to sell commercial housing through the "shared property rights" method. Buyers can purchase no less than 50% of the property rights in advance, and the remaining property rights will continue to be held by the real estate development company and leased by the buyer, and then the remaining property rights will be purchased according to the contract between the two parties.
In the context of destocking, innovative ways of selling houses are gradually emerging. From the starting point, this is undoubtedly a good thing, which can not only help buyers lower the threshold for buying houses, but also help real estate companies to destock.
Zhang Bo, director of the 58 Anjuke Research Institute, said that this idea is similar to the "shared property housing" promoted by local governments a few years ago. Homebuyers and the government jointly own the property rights of the house. Homebuyers only need to pay part of the price, and the government holds the remaining property rights. The purpose of promoting this policy is also to reduce the cost of buying a house.
In this regard, some homebuyers told reporters that if there is no mortgage and no interest, it is still possible. However, more homebuyers expressed concerns and questions, "Will it affect the sale of the house?" "What if the real estate company goes bankrupt? Will the house be affected?" "How to transfer all property rights in the future?"
Some homebuyers also pointed out that developers can recover cash through rent collection, but can their cash flow be sustained? Will it increase financial pressure?
Industry: If real estate companies encounter funding problems, the potential risks are great
In the opinion of industry insiders, the "half purchase, half rent" model has difficulties in implementation, whether from the perspective of home buyers or developers.
Gao Yuansheng, executive vice president of East China Region of China Index Academy, pointed out that "home buyers need to pay rent to developers for subsequent use. Although it can be used as collateral for the purchase price in the end, it adds a new cost invisibly during the purchase of full ownership, and the risk of real estate developers and home buyers holding property together must also be considered."
Zhang Bo said: "The credit rating of real estate companies is definitely significantly lower than that of local governments. The trust between homebuyers and the government in jointly owning property rights is strong, but real estate companies are independent business entities. In recent years, there have been increasing risks. Whether homebuyers are willing to jointly own properties with real estate companies is a question. Once real estate companies have financial problems, whether it will affect the shared houses is also a concern for homebuyers. Even if the shared ownership of the house can be divided and does not affect the part held by the homebuyer, the division of property rights may also cause problems at the level of subsequent house transactions."
Li Yujia, chief researcher at the Guangdong Housing Policy Research Center, also believes that the biggest problem with this move is that if the property rights held by the real estate company are enforced due to some legal or debt disputes, it will damage the rights and interests of home buyers, which is a big uncertainty factor. Based on this consideration, it is estimated that home buyers are not very receptive to this shared property model, "and this model, from the current point of view, has almost no cases."
In addition, it is still unknown whether developers are willing to adopt this sales model.
Zhang Bo said: "For real estate developers, the 'half-purchase, half-rent' policy will slow down cash flow. Although it may speed up housing transactions to a certain extent, it may not be the best choice for real estate developers with heavy financial pressure because part of the property rights have not been traded and need to be slowly returned through rent."
Beijing News reporter Duan Wenping
Edited by Yang Juanjuan and proofread by Mu Xiangtong
